Kuwait’s non-oil sector to grow 3.8% in 2023: IMF

Kuwait’s non-oil growth is projected to increase to about 3.8 percent in 2023 on account of a robust expatriate community, the International Monetary Fund has forecast.

While overall growth is anticipated to drop to 0.1 percent this year, the non-oil economy will be strengthened on the back of the financial stimulus and partial recovery in the employment of expatriates, according to the IMF’s latest analysis of Kuwait.

The county’s advancement will occur despite the slow growth of real credit, said the report, adding: “Benefiting from high oil production and prices, Kuwait’s economic recovery continues.”

The report noted that Kuwait showed adequate recovery from the effects of the pandemic, and inflation has been controlled given the limited spillover from higher global food and energy prices.

This resulted from managed prices and subsidies, as well as the general tightening of monetary policy in line with major central banks.

Kuwait’s fiscal balance has developed since its overall fiscal surplus is expected to have increased by 22.5 percent of the gross domestic product in 2022, up from 6.4 percent in 2021.

As for the country’s external balance, the current account surplus is estimated to have increased to 33 percent of the GDP last year, up from 26.6 percent in 2021.

Additionally, the country’s financial stability has been preserved as its banking sector sustains an efficient level of capital and liquidity.

Economic threats

The instability of oil prices and production brought on by external factors pose risks to Kuwait’s external balance, public finances, growth and inflation, according to the report.

Kuwait’s economy could also be at risk of the slowdown in global growth due to further tightening of monetary policy or pressures in the banking sectors of major advanced economies.

The report also noted that the country is susceptible to the delay in implementing the necessary financial and structural reforms, which could lead to the continuation of the current public fiscal policy.

In turn, this might damage investor trust, while limiting progress towards diversifying economic activity and boosting its competitiveness.

“The dominance of oil in the economy, coupled with global decarbonization trends, necessitates fiscal reforms to reinforce sustainability, and structural reforms to boost non-oil private sector-led growth,” said the report, adding: “Political gridlock between the government and parliament has hindered reform progress, which could be made now from a position of strength.”